Who is “LESA”?
LESA isn’t anyone at all, but a new layer of underwriting that was put into place two years ago for Reverse loans.
This is an acronym for “Life Expectancy Set Aside” and it’s purpose is to review a potential Reverse loan borrower’s ability, capacity and willingness to continue to pay their housing expenses; property taxes, Homeowners Insurance, any HOA fees or Flood insurance premiums.
The Lender will verify that the expenses associated with the property will have been paid on time for the previous 24 months and if they haven’t a Letter of Explanation must be provided by the borrower to explain “why’ they were late, along with any documentation to support their explanation.
This letter must also explain any derogatory credit that may show on their credit report, as well.
The Loan Officer is now required to collect all sources of any income the borrower is receiving in addition to their Social Security and what this means, that there are more documents to collect from the clients than in the past.
- (2) Years 1040’s if they are self-employed or have rental income from other properties
- (2) W’s if they are still employed and recent YTD Paystubs for 30 days.
- Social Security Award Letter to document how much they will receive in the following year.
- (2) Months Checking acct statements to verify SS and or Pension deposits
- (2) Months or most recent Quarterly statements for all Cash Reserves.
- And additional items may be requested during the loan processing time.
Because this post is becoming too long, I will continue it on another one after this one has been published.
But don’t let this scare you, as reverse loans are still easy to qualify for, there’s just more Underwriting being done than there was previously.